Dogecoin had an incredible year in 2020 when the world’s richest man, Elon Musk, declared his support for the token. He even made an appearance on Saturday Night Live lampooning his support of Dogecoin.
The memecoin mania lasted a few years, but it ended around when Bitcoin started to falter in early 2021 and completely fell apart around the time that FTX collapsed. There was a resurgence in Dogecoin’s price when Elon Musk purchased Twitter.
This resurgence was short lived, though. Neither Twitter nor Musk have made any announcements in regards to the use of Dogecoin on Twitter. Other developments with Dogecoin like Dogechain have proved unpopular. And the price of the dog-themed cryptocurrency is lagging behind its more utility focused peers.
However, Dogecoin is not the only memecoin on the market. There are countless other ones and the vast majority of them have not done remotely well. The most notable competitor to Dogecoin is Shiba Inu, which has fared poorly in 2023.
The only memecoins that have done well in 2023 are BONK and Floki, which are both based on the surging Solana blockchain.
So, are meme coins dead? Or is this just another bump in the road for their path to market dominance?
This article will explore both arguments.
Are Meme Coins Dead?
Meme coins are certainly not dead. Dogecoin has a $12 billion market cap and Shiba Inu has a $7 billion market cap, which makes them the 9th and 15th largest cryptocurrencies (Source: World Coin Stats).
Floki and BONK are both much less popular with market caps of $200 million and $35 million.
To fully answer the question, meme coins are not dead. However, the market is consolidating around the popular memecoins – Dogecoin and Shiba Inu. It’s unlikely that a competitor will surpass either of those meme coins in the short or medium term.
A consolidation phase like the one we are witnessing is common. Interest dies down in the projects and the smaller ones feel that loss of interest a lot more than the larger projects that can better absorb less community members.
Why Meme Coins Crash Harder?
There are a few reasons why meme coins are crashing far harder than other cryptocurrencies. This section will outline some of those reasons.
The biggest reason, in our opinion, that memecoins are crashing is the rough global economy. Meme coins had their heyday in 2020 and 2021, which was when the United States and many western countries were printing money non-stop and issuing stimulus checks.
People were receiving a lot of money, but the COVID-19 lockdowns meant they could not spend this money. This caused a massive boom for ecommerce businesses and the cryptocurrency industry.
Of course, this did not last forever. Money became a lot tighter, lockdowns ended, and total time on the computer went down.
This marked the beginning of the end of the cryptocurrency bull market. And the hardest hit were projects that did not provide a lot of value – meme coins make up a large portion of cryptocurrencies that provide little to no real world value.
Institutional Investors Tend to Avoid Meme Coins
Institutional investors make up a large portion of the trading volume of the major cryptocurrencies. The exact numbers are unknown due to the nature of cryptocurrency, but some suspect it’s over 50% of the trading activity of coins like Ether and Bitcoin.
Meme coins do not have that going for them. Institutional investors tend to shy away from meme coins for a variety of reasons. But it’s mostly because they do not see the long-term viability of these projects.
This has its positives like less market manipulation. The downside is that this means the price is often determined by the general public. The general public can be very fickle and fad oriented. Dogecoin could be popular one day receiving countless mentions in the media and then disappear from the media. The lack of big, institutional money means that the price can drop harder and it can be harder for it to recover barring any media mentions.
Remember, meme coins rely on their value increasing from the community spreading the message. The media often serves as a megaphone for that, so when these projects fail to have media mentions, then they can really start to fall off.
SafeMoon’s Collapse Hurt The Industry
The final problem that meme coins had to deal with in 2022 relates to the nearly complete collapse of SafeMoon in 2022. SafeMoon already had problems going into 2022 that were further exacerbated by YouTuber Coffeezilla releasing an expose about SafeMoon titled, “I UNCOVERED A BILLION DOLLAR FRAUD.”
In the video, Coffeezilla makes claims that the SafeMoon bilked investors out of billions of dollars. Multiple class action lawsuits are filed against SafeMoon and the founder, John Karony, also received lawsuits from investors.
The token went from an all-time high market cap of $17 billion to a market cap around $150 million at the time of writing – that’s a 99% decrease in market cap from the all-time high.
The loss of trust in SafeMoon greatly impacted the meme coin industry. If SafeMoon is not legit, then what about all the other meme coins?
A decent amount of the general public views meme coins as a gigantic scam, so fraud allegations against one of the more well-known meme coins will greatly erode trust in the industry as a whole.
Are Meme Coins Viable in The Long Term?
We do not see much long term viability for meme coins. In our opinion, they are simply a product of the time. Specifically, the newness of cryptocurrency allows meme coins to flourish. As Bitcoin, Ethereum, Cardano, and Solana begin to gain market cap they will likely push the mostly useless meme coins out of the market.
That’s not to say it’s impossible to make money with meme coins – there’s certainly money to be made in the industry. It just does not have the long term staying power of projects like Bitcoin or the smart contract blockchains (Ethereum, Cardano, Solana, etc.).
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